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2Q15 Hedge Fund Activity in Norfolk Southern

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2Q15 Hedge Fund Activity in Norfolk Southern PART 1 OF 5

Money Managers Liquidate Stakes in Norfolk Southern in 2Q15

Norfolk Southern sees more sell-offs from institutional investors in 2Q15

In this series, we’ll see how institutional investors have played railroads with a specific focus on Norfolk Southern (NSC). In 2Q15, institutional investors turned bearish on railroads, with Class I operators experiencing more sell-offs and position reductions than purchases. These railroads include Union Pacific (UNP), CSX (CSX), Canadian National Railway (CNI), Norfolk Southern, Canadian Pacific Railway (CP), and Kansas City Southern (KSU).

Norfolk Southern, Canadian Pacific, and Union Pacific witnessed the largest falls in shares held by institutional investors at 2.40%, 3.28%, and 2.09%, respectively. Railroads have had a rough year so far in 2015, as softened commodity prices have adversely impacted freight volumes.

Coal, which has historically contributed roughly 20% of industry operators’ top line, has seen sharp volume decline this year. Given the bleak outlook, volumes are expected to remain low over the next 12 months.

Norfolk Southern has lost 30.17% in share price so far in 2015 compared to the peer average of 23.97%. This is the highest loss among Norfolk’s peer group. Norfolk saw reductions and sell-offs from the portfolios of 500 institutional investors in 2Q15 compared to new portfolio positions and additions from 330 asset managers. Overall, shares held by institutional investors in NSC fell ~5 million during the last quarter to 204 million.

Money Managers Liquidate Stakes in Norfolk Southern in 2Q15

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Sector performance

Railroads fall under the transportation sector, which includes other industries such as shipping, trucking, airlines, and courier service providers. Overall, the sector has been affected by weakening volumes across subindustries and macro headwinds with the Dow Jones Transportation Average falling 14.17% year-to-date.

The iShares Transportation Average ETF (IYT) tries to replicate the performance of the Dow Jones Transportation Average Index. It invests 25% of its portfolio in railroads.

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